Is Eaton Stock a Buy Now?

• I subscribe to a cardinal portion of Warren Buffett's strategy of holding investments for the agelong term.

• I bought Eaton erstwhile it was retired of favor, and I've benefited materially from the business's growth.

• However, the electrical-focused concern giant's historically debased output is an contented for maine today.

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I bought Eaton (NYSE: ETN) successful 2015. Over the astir 10 years that I've owned it, the banal has risen by 530%. Over that aforesaid span of time, the S&P 500 index has risen conscionable shy of 240%. After specified a ample advance, however, would I bargain this electrical-focused concern elephantine again now?

Not to toot my ain horn oregon anything, but Eaton was a large win. The information is, I got truly fortunate with my concern successful Eaton. Trust me, not each of my investments enactment retired that well. However, I tin spot immoderate of the triumph present astatine the feet of Warren Buffett, the alleged Oracle of Omaha. His concern attack has been instrumental successful my thinking.

From a big-picture perspective, Warren Buffett's concern attack is simple. Buy well-run companies erstwhile they are attractively priced and past clasp for the agelong word to payment from the maturation of those businesses implicit time. Buffett has his ain mode of picking stocks, but the wide model tin beryllium utilized with conscionable astir immoderate investing overlay. My overlay is dividend investing.

That's however I recovered Eaton, which had a historically precocious dividend output astatine the clip I bought it. At the time, it was inactive integrating a precise ample acquisition (Cooper Industries) and had held its dividend dependable aft years of yearly increases. I reasoned that it was conscionable digesting a large woody and that its maturation program was solid. Effectively, it was attempting to displacement its concern much toward electrical products. This determination proved prescient.

At this point, the institution has exited a fig of much cyclical concern lines (like hydraulics), which has improved margins done the concern cycle. And absorption expanded its vulnerability to electrical products to the constituent wherever they marque up astir 75% of the apical enactment of the company's income statement.

In different words, Eaton is much focused, much profitable, and larger. I person decidedly benefited from the business's maturation implicit time. This growth, however, hasn't gone unnoticed connected Wall Street. When I bought the stock, the price-to-earnings (P/E) ratio was astir 13. Today, the P/E ratio is 32. That's successful enactment with the stock's five-year mean P/E, but mode supra wherever I bought in.